FRESH TRACKS THERAPEUTICS, INC. Overview
We are a clinical-stage pharmaceutical company striving to transform patient
lives by developing innovative and differentiated prescription therapeutics for
the treatment of autoimmune, inflammatory, and other debilitating diseases. Our
pipeline combines several development-stage candidates and a cutting-edge
platform with broad potential in autoimmune and inflammatory disorders with a
potential best-in-class, late-stage program for the treatment of primary
axillary hyperhidrosis. Our executive management team and board of directors
bring extensive experience in product development and global commercialization,
having served in
58
--------------------------------------------------------------------------------
Table of Contents
leadership roles at large global pharmaceutical companies and biotechs that have
developed and/or launched successful products, including several that were
first-in-class and/or achieved iconic status, such as Cialis®, Taltz®, Gemzar®,
Prozac®, Cymbalta®, and Juvederm®. Our strategy is to leverage this experience
to in-license, acquire, develop, and commercialize innovative pharmaceutical
products that we believe can meaningfully benefit patients who are suffering
from chronic, debilitating diseases in the foregoing target disease areas and
that are underserved by available therapies.
The following table summarizes our product development programs:
[[Image Removed: bbi-20211231_g1.jpg]]Research & Development Programs
BBI-02: A Potential First-in-Class Oral DYRK1A Inhibitor for the Treatment of Autoimmune and Inflammatory Diseases
OnAugust 27, 2021 , we entered into the Voronoi License Agreement with Voronoi, pursuant to which we acquired exclusive, worldwide rights to research, develop, and commercialize BBI-02, a potential first-in-class oral DYRK1A inhibitor, and other novel DYRK1A therapeutics developed from Voronoi's proprietary kinase inhibitor platform. These novel DYRK1A inhibitors aim to restore immune balance in patients whose immune system has become dysregulated. Based on the promising preclinical efficacy data generated to date with BBI-02, we believe these drug candidates have the potential to offer first-in-class, potent therapies to treat a wide array of debilitating autoimmune and inflammatory diseases. Our lead development-stage program, BBI-02, is a Phase 1-ready, highly selective, and orally bioavailable DYRK1A inhibitor that has demonstrated promising results in various preclinical models, including AD and RA. In these models, BBI-02 showed encouraging decreases in disease severity and reduction of pro-inflammatory cytokines compared to current standard-of-care agents, such as JAK inhibitors and TNF biologics. Notably, many current therapies for autoimmune disorders are broadly immunosuppressant, which may lead to severe side effects, such as increased infection risk. Preclinical data have shown BBI-02 to drive regulatory T-cell differentiation while dampening pro-inflammatory TH17 cells and MyD88/IRAK4-related signaling pathways. Regulatory T cells serve to maintain tolerance and keep the autoreactive, pro-inflammatory T cells in check, thus inhibiting autoimmune disease and limiting chronic inflammation. The MyD88 protein is normally spliced into a long form and a short form. DYRK1A inhibition shifts the balance to produce more MyD88 short form, which leads to IRAK4, a protein kinase involved in signaling immune responses from toll-like receptors, not being phosphorylated and so appears to deactivate downstream cascades of certain pro-inflammatory cytokines. Based on current understanding, this inhibition of the release of excess cytokines can be achieved by 59 -------------------------------------------------------------------------------- Table of Contents re-establishing the role of MyD88 short form as a negative regulator of this pathway. Unlike many existing therapies, as well as those currently being investigated, BBI-02 may have the ability to target both the adaptive and innate immune imbalance simultaneously, potentially resulting in, or substantially achieving, restoration of immune homeostasis that, if proven, would represent a paradigm shift in the treatment of certain autoimmune and inflammatory diseases. We are on track to progress BBI-02 into a Phase 1 clinical trial inCanada in the second quarter of 2022. This Phase 1 study is expected to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of BBI-02 in both healthy volunteers and subjects with AD and will include a preliminary assessment of efficacy. Part 1A of the Phase 1 trial will be a single ascending dose (SAD) assessment in healthy volunteers, Part 1B will be a multiple ascending dose (MAD) assessment in healthy volunteers, and Part 2 will compare BBI-02 to placebo in moderate-to-severe AD patients. Topline results from the Phase 1 SAD and MAD trials (Parts 1A and 1B) are anticipated year-end 2022. BBI-02 is covered by a composition of matter patent issued in theU.S. ,Japan ,China , and other key countries through at least 2038, subject to patent term extensions and adjustments that may be available depending on how this early-stage asset is developed, as well as a pending PCT application, and other foreign andU.S. applications for BBI-02, as of the date of this Annual Report.
BBI-10: A Covalent
OnFebruary 2, 2022 , we entered into the Carna License Agreement with Carna, pursuant to which we acquired exclusive, worldwide rights to research, develop, and commercialize Carna's portfolio of novelSTING inhibitors.STING is a well-known mediator of innate immune responses. Excessive signaling throughSTING is linked to numerous high unmet need diseases, ranging from autoimmune disorders, such as systemic lupus erythematosus and RA, to interferonopathies, which are a set of rare genetic conditions characterized by interferon overproduction and could have orphan drug potential.STING is a key component of the cGAS-STING pathway, which plays an important role in the activation of innate immunity. cGAS acts as a DNA sensor, detecting DNA from sources such as invading bacteria, viruses, and cellular debris that can arise from aging and tissue damage. Upon DNA binding, cGAS produces the secondary messenger molecule cGAMP, which binds toSTING .STING then undergoes the post-translational modification called palmitoylation, a step essential to the activation ofSTING . ActivatedSTING then in turn activates the recruitment of kinases that phosphorylate IRF3 and I?B?. Phosphorylated IRF3 leads to activation of the type I interferon response, while phosphorylated I?B? activates NF?B and increases the secretion of pro- inflammatory cytokines such as IL-6 and TNF?, resulting in inflammation. While the innate immune response is an important defense mechanism, a dysregulated type I interferon response and overproduction of pro-inflammatory cytokines also represents a driving cause for multiple autoimmune and inflammatory diseases. As such, targeting the cGAS-STING pathway may be a novel approach to treating these diseases. BBI-10, our lead early-stageSTING inhibitor candidate, is a novel, potent, and orally available covalentSTING inhibitor that specifically targets the palmitoylation site ofSTING , which allows it to inhibit both wild-typeSTING and gain-of-function mutants without competing with cGAMP binding, thus deactivating downstream signaling through IRF3 and I?B? and ultimately suppressing inflammation. BBI-10 has exhibited strong proof-of mechanism and a promising profile in initial pharmacokinetics, toxicology, and safety pharmacology studies. In addition, in vitro studies show that BBI-10 more potently blocks theSTING pathway compared to other knownSTING palmitoylation inhibitors, and that mice treated with BBI-10 demonstrate significant decreases in pro-inflammatory cytokine production following stimulation ofSTING . Nonclinical development activities for BBI-10 are currently underway, and we expect to conduct experimental characterization of theSTING inhibitor library throughout 2022. 60 -------------------------------------------------------------------------------- Table of Contents For BBI-10, as of the date of this Annual Report, we currently have one pending PCT application and one pending priority patent application. We possess an exclusive license directed to a library of compounds targeting/inhibitingSTING , pharmaceutical compositions containing the same, and methods of their use, which are being evaluated.
Next-Generation Kinase Inhibitors: A Cutting-Edge Platform with Potential to Produce Treatments for Autoimmune, Inflammatory, and Other Debilitating Diseases
As part of the Voronoi License Agreement, inAugust 2021 we acquired exclusive global rights to a cutting-edge platform of next-generation kinase inhibitors, in addition to BBI-02. This library of new chemical entities includes next-generation DYRK1A inhibitors, as well as other molecules that specifically inhibit LRRK2, TTK (also known as Monopolar spindle 1 (Mps1)), and CLK kinases. A number of these drug candidates have the potential to penetrate the blood brain barrier, presenting an opportunity to address neuroinflammatory conditions of high unmet need such as Down Syndrome, Alzheimer's Disease, and Parkinson's Disease, while other peripherally acting novel LRRK2, TTK, and CLK kinase inhibitors could be developed in additional therapeutic areas within autoimmunity, inflammation, and oncology. We are currently engaged in research to identify both brain penetrant and non-brain penetrant new chemical entities from this next-generation kinase inhibitor platform.
Compounds from the next-generation kinase inhibitor platform are covered by
Sofpironium Bromide: A Potential Best-in-Class Investigational Product for the Treatment of Primary Axillary Hyperhidrosis
Sofpironium bromide is a new chemical entity that belongs to a class of medications called anticholinergics. Anticholinergics block the action of acetylcholine, a chemical that transmits signals within the nervous system that are responsible for a range of bodily functions, including activation of the sweat glands. Sofpironium bromide was retrometabolically designed. Retrometabolic drugs are designed to exert their action locally and are potentially rapidly metabolized into a less active form once absorbed into the blood. We have developed sofpironium bromide gel, 15% as a potential best-in-class, self-administered, once daily, topical therapy for the treatment of primary axillary hyperhidrosis, also known as excessive underarm sweating. Hyperhidrosis is a debilitating, life-altering medical condition of sweating beyond what is physiologically required for thermoregulation of the body. Primary axillary hyperhidrosis is believed to be caused by an overactive cholinergic response of the sweat glands and affects an estimated 15.3 million, or 4.8%, of theU.S. population, and 12.76% of the population inJapan . According to a 2016 update on the prevalence and severity of hyperhidrosis in theU.S. , axillary hyperhidrosis, which is the targeted first potential indication for sofpironium bromide, is the most common occurrence of hyperhidrosis, affecting approximately 65% of patients, or an estimated 10 million individuals, in theU.S. Sofpironium bromide gel, 15% has completed aU.S. Phase 3 pivotal clinical program (also referred to as our "Cardigan Studies") for the treatment of primary axillary hyperhidrosis, and sofpironium bromide gel, 5% is approved inJapan for the same indication under the brand name ECCLOCK®. Following a pre-NDA meeting with the FDA held in the first quarter of 2022, we remain on track to file an NDA for sofpironium bromide gel, 15% in mid-2022. Given the significant cost to obtain FDA approval of an NDA and, if approved, to launch sofpironium bromide successfully in theU.S. , we are presently evaluating different options that include: (i) commercializing sofpironium bromide alone; (ii) partnering with a contract sales organization that has an embedded sales force and other commercial capabilities in which to share costs and profits; or (iii) assigning/selling our rights to 61 -------------------------------------------------------------------------------- Table of Contents sofpironium bromide to another third party pharmaceutical company or investment entity to commercialize on its own. No decision on our strategic direction for sofpironium bromide has been finalized as of the date of this Annual Report. As ofDecember 31, 2021 , regarding our patent portfolio for sofpironium bromide, we owned or possessed an exclusive license to 18 issuedU.S. patents and 137 patents granted, registered, or allowed in foreign countries, including validations in member states of theEuropean Patent Organisation . For sofpironium bromide, for the same time period, we owned or possessed an exclusive license to eight pendingU.S. patent applications, 87 pending foreign patent applications, and two pending international patent applications to be nationalized in 2022, which, if issued, may provide patent term coverage to 2041 in certain cases and countries, and even further subject to availability of patent term extension or adjustments. We continue to prosecute pending applications for sofpironium bromide globally as of the date of this Annual Report.
OurU.S. Phase 3 pivotal clinical program for sofpironium bromide gel, 15% was comprised of two pivotal clinical studies. The Cardigan I and Cardigan II studies enrolled 350 subjects and 351 subjects, respectively, who were nine years of age and older with primary axillary hyperhidrosis. The Cardigan Studies were multicenter, randomized, double-blinded, vehicle (placebo)-controlled, evaluating the efficacy and safety of topically applied sofpironium bromide gel, 15%. Subjects applied sofpironium bromide gel, 15% or placebo to their underarms once daily at bedtime for six consecutive weeks, with a two-week post-treatment follow-up. The co-primary efficacy endpoints of the Cardigan Studies included the proportion of subjects achieving at least a 2-point improvement on the HSDM-Ax scale, a proprietary and validated patient-reported outcome measure, and change in GSP, each from baseline to EOT. InOctober 2021 , we reported positive topline results from both Cardigan Studies, which achieved statistical significance on all primary and secondary efficacy endpoints. In the Cardigan I and II Studies, sofpironium bromide gel, 15% was generally well-tolerated.
Cardigan Studies Efficacy Results*
All primary and secondary efficacy endpoints demonstrated statistically
significant differences between sofpironium bromide gel, 15% (SB) and vehicle
(or placebo), as follows:
Cardigan I Cardigan II
Co-Primary Efficacy Endpoints SB Vehicle p-value SB Vehicle p-value
(n=173) (n=177) (n=180) (n=171)
•Proportion of subjects achieving at 49.3% 29.4% p<0.001 63.9% 47.0% p=0.003
least a 2-point improvement in the
HDSM-Ax score from baseline to EOT
•Change in GSP from baseline to EOT -129.5 -99.3 p=0.002 -145.9 -131.7 p=0.030
(in mg)
62--------------------------------------------------------------------------------
Table of Contents
Cardigan I Cardigan II
Secondary Efficacy Endpoints SB Vehicle p-value SB Vehicle p-value
(n=173) (n=177) (n=180) (n=171)
•Proportion of subjects achieving at 82.8% 69.5% p=0.005 89.9% 80.8% p=0.020
least a 1-point improvement in the
HDSM-Ax score from baseline to EOT
•Proportion of subjects achieving at 32.1% 10.2% p<0.0001 35.5% 21.4% p=0.006
least a 2point improvement in the
HDSM-Ax score and at least a 70%
reduction in GSP from baseline to EOT
•Proportion of subjects achieving at 54.3% 33.3% p<0.001 68.7% 54.6% p=0.014
least a 1point improvement in the
HDSM-Ax score and at least a 50%
reduction in GSP from baseline to EOT
* Intent-to-Treat analysis population
Cardigan Studies Safety Results
In the Cardigan Studies, sofpironium bromide gel, 15% was generally well-tolerated. The TEAEs were mild or moderate in severity and transient in nature. Overall, 89% of patients who were randomized to sofpironium gel, 15% in the studies completed the full six weeks of treatment. Common adverse events (incidence ?2%) observed in the sofpironium bromide gel, 15% treatment group in the Cardigan I and II studies were dry mouth (11.6%, 17.2%), blurred vision (5.2%, 11.7%), application site pain (6.4%, 10.0%), application site erythema (5.2%, 7.8%), mydriasis (7.5%, 5.0%), application site pruritis (6.4%, 2.2%), application site dermatitis (5.8%, 5.6%), urinary retention (1.2%, 3.3%), application site irritation (1.2%, 3.3%), dry eye (0.6%, 3.3%), headache (1.2%, 2.2%), constipation (0.6%, 2.2%) and urinary hesitation (0.6%, 2.2%), respectively. Five (2.9%) and nine (5.0%) subjects who received sofpironium bromide gel, 15%, discontinued the Cardigan I and II studies, respectively, due to a TEAE. No treatment-related serious adverse events were reported.
Collaboration with Kaken in
Under the Kaken Agreement, we and Kaken have completed multiple clinical trials of sofpironium bromide gel involving over 1,690 subjects in theU.S. andJapan . These trials evaluated the potential safety, tolerability, pharmacokinetics, and efficacy of sofpironium bromide gel in adult and pediatric patients with primary axillary hyperhidrosis and healthy adult subjects. InSeptember 2020 , Kaken received regulatory approval inJapan to manufacture and market sofpironium bromide gel, 5% under the brand name ECCLOCK for the once-daily treatment of primary axillary hyperhidrosis.Japan is the first country to approve sofpironium bromide, which also marks the first approval of a topical prescription product for the treatment of primary axillary hyperhidrosis inJapan . This approval was based on the results of Kaken's Japanese pivotal Phase 3 registration study of sofpironium bromide gel, 5% in 281 patients with primary axillary hyperhidrosis. InNovember 2020 , Kaken launched commercial sales of ECCLOCK inJapan . This marked the first commercialization of sofpironium bromide for any indication worldwide. Under the Kaken Agreement, we are entitled to receive commercial milestone payments, as well as tiered royalties based on a percentage of net sales of ECCLOCK inJapan . As a result, beginning in the fourth quarter of 2020, we have recognized royalty revenue earned on a percentage of net sales of ECCLOCK inJapan . In addition toJapan , Kaken has rights to develop and commercialize sofpironium bromide inSouth Korea ,China , and certain other Asian countries, and we are entitled to receive royalties based on a percentage of Kaken's net sales in these countries. 63 -------------------------------------------------------------------------------- Table of Contents Significant Financing and Licensing Arrangements
Public Offerings of Common Stock and Warrants
InOctober 2021 , we completed the sale of 30,263,400 shares of our common stock (the "October 2021 Offering"). TheOctober 2021 Offering resulted in net proceeds of approximately$10.3 million , after deducting the underwriting discount and offering expenses payable by us. We are using the net proceeds from theOctober 2021 Offering for research and development, including clinical trials, working capital, business development, and general corporate purposes. InJuly 2021 , we completed the sale of 12,983,871 shares of our common stock (the "July 2021 Offering"). TheJuly 2021 Offering resulted in net proceeds of approximately$7.3 million , after deducting underwriting discounts and commissions and offering expenses. We are using the net proceeds from theJuly 2021 Offering for research and development, including clinical trials, working capital, and general corporate purposes. InOctober 2020 , we completed the sale of 19,003,510 shares of our common stock, and, to certain investors, pre-funded warrants to purchase 1,829,812 shares of our common stock, and accompanying common stock warrants to purchase up to an aggregate of 20,833,322 shares of our common stock (the "October 2020 Offering"). TheOctober 2020 Offering resulted in net proceeds of approximately$13.7 million to us after deducting underwriting commissions and discounts and other offering expenses of$1.3 million and excluding the proceeds from the exercise of the warrants. During the year endedDecember 31, 2021 , 12,427,387 common warrants associated with theOctober 2020 Offering were exercised at a weighted-average exercise price of$0.72 per share, resulting in aggregate proceeds of approximately$8.9 million . We are using the net proceeds from theOctober 2020 Offering for research and development, including clinical trials, working capital, and general corporate purposes. InJune 2020 , we completed the sale of 14,790,133 shares of our common stock, and, to certain investors, pre-funded warrants to purchase 2,709,867 shares of our common stock, and accompanying common warrants to purchase up to an aggregate of 17,500,000 shares of our common stock (the "June 2020 Offering"). TheJune 2020 Offering resulted in approximately$18.7 million of net proceeds after deducting underwriting commissions and discounts and other offering expenses of$1.4 million and excluding the proceeds from the exercise of the warrants. During the year endedDecember 31, 2021 , 17,500 common warrants associated with theJune 2020 Offering were exercised at a weighted-average exercise price of$1.25 per share, resulting in aggregate proceeds of approximately$22 thousand . We are using the net proceeds from theJune 2020 Offering for research and development, including clinical trials, working capital, and general corporate purposes. For additional information regarding the offerings described above, see Note 7. "Capital Stock" of the notes to our consolidated financial statements included in this Annual Report.
At Market Issuance Sales Agreements
InMarch 2021 , we entered into an At Market Issuance Sales Agreement (the "2021 ATM Agreement") withOppenheimer & Co. Inc. ("Oppenheimer") andWilliam Blair as our sales agents (the "Agents"). Pursuant to the terms of the 2021 ATM Agreement, we may sell from time to time through the Agents shares of our common stock having an aggregate offering price of up to$50.0 million . Such shares are issued pursuant to our shelf registration statement on Form S-3 (Registration No. 333-254037). Sales of shares are made by means of ordinary brokers' transactions on The Nasdaq Capital Market at market prices or as otherwise agreed by us and the Agents. Under the terms of the 2021 ATM Agreement, we may also sell the shares from time to time to an Agent as principal for its own account at a price to be agreed upon at the time of sale. Any sale of the shares to an Agent as principal would be pursuant to the terms of a separate placement notice between us and such Agent. During the year endedDecember 31, 2021 , we sold 4,449,828 shares of our common stock under the 2021 ATM Agreement at a weighted-average price of$0.89 per share, for aggregate net proceeds of$3.8 million , 64 -------------------------------------------------------------------------------- Table of Contents after giving effect to a 3% commission to the Agents. As ofDecember 31, 2021 , approximately$46.0 million of shares of common stock were remaining, but had not yet been sold under the 2021 ATM Agreement. InApril 2020 , we entered into an At Market Issuance Sales Agreement (the "2020 ATM Agreement" and, together with the 2021 ATM Agreement, the "ATM Agreements") with Oppenheimer as our sales agent. Pursuant to the terms of the 2020 ATM Agreement, we may sell from time to time through Oppenheimer shares of our common stock having an aggregate offering price of up to$8.0 million . Such shares are issued pursuant to our shelf registration statement on Form S-3 (Registration No. 333-236353). Sales of the shares are made by means of ordinary brokers' transactions on The Nasdaq Capital Market at market prices or as otherwise agreed by us and Oppenheimer. Under the terms of the 2020 ATM Agreement, we may also sell the shares from time to time to Oppenheimer as principal for its own account at a price to be agreed upon at the time of sale. Any sale of the shares to Oppenheimer as principal would be pursuant to the terms of a separate placement notice between us and Oppenheimer. During the year endedDecember 31, 2021 , we sold 1,089,048 shares of our common stock under the 2020 ATM Agreement at a weighted-average price of$1.55 per share, for aggregate net proceeds of approximately$1.6 million , after giving effect to a 3% commission to Oppenheimer as agent. As ofDecember 31, 2021 , approximately$2.6 million of shares of common stock were remaining, but had not yet been sold under the 2020 ATM Agreement. Private Placement Offerings InFebruary 2020 , we andLincoln Park Capital Fund, LLC ("Lincoln Park") entered into (i) a securities purchase agreement (the "Securities Purchase Agreement"); (ii) a purchase agreement (the "Purchase Agreement"); and (iii) a registration rights agreement (the "Registration Rights Agreement"). Pursuant to the Securities Purchase Agreement, Lincoln Park purchased, and we sold, (i) an aggregate of 950,000 shares of common stock (the "Common Shares"); (ii) a warrant to initially purchase an aggregate of up to 606,420 shares of common stock at an exercise price of$0.01 per share (the "Series A Warrant"); and (iii) a warrant to initially purchase an aggregate of up to 1,556,420 shares of common stock at an exercise price of$1.16 per share (the "Series B Warrant" and, together with the Series A Warrant, the "Warrants"). The aggregate gross purchase price for the Common Shares and the Warrants was$2.0 million . Under the terms and subject to the conditions of the Purchase Agreement, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase, up to$28.0 million in the aggregate of shares of our common stock. In order to retain maximum flexibility to issue and sell up to the maximum of$28.0 million of our common stock under the Purchase Agreement, we sought and, at our annual meeting onApril 19, 2021 , received, stockholder approval for the sale and issuance of common stock in connection with the Purchase Agreement under Nasdaq Listing Rule 5635(d). Sales of common stock by us will be subject to certain limitations, and may occur from time to time, at our sole discretion, over the 36-month period commencing onAugust 14, 2020 (the "Commencement Date"). Following the Commencement Date, under the Purchase Agreement, on any business day selected by us, we may direct Lincoln Park to purchase up to 100,000 shares of our common stock on such business day (each, a "Regular Purchase"), provided, however, that (i) the Regular Purchase may be increased to up to 125,000 shares, provided that the closing sale price of the common stock is not below$3.00 on the purchase date; and (ii) the Regular Purchase may be increased to up to 150,000 shares, provided that the closing sale price of the common stock is not below$5.00 on the purchase date. In each case, Lincoln Park's maximum commitment in any single Regular Purchase may not exceed$1,000,000 . The purchase price per share for each such Regular Purchase will be based on prevailing market prices of common stock immediately preceding the time of sale. In addition to Regular Purchases, we may direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds certain threshold prices as set forth in the Purchase Agreement. In all instances, we may not sell shares of our common stock to Lincoln Park under the Purchase Agreement if it would result inLincoln Park beneficially owning more than 9.99% of the outstanding shares of our common stock. During the year endedDecember 31, 2021 , we sold to 65 -------------------------------------------------------------------------------- Table of Contents Lincoln Park 1,300,000 shares under the Purchase Agreement at a weighted-average price of$0.81 per share, for aggregate net proceeds of$1.0 million . As ofDecember 31, 2021 , approximately$26.9 million of shares of common stock were remaining, but had not yet been sold under the Purchase Agreement. We agreed with Lincoln Park that we will not enter into any "variable rate" transactions with any third party, subject to certain exceptions, for a period defined in the Purchase Agreement. We have the right to terminate the Purchase Agreement at any time, at no cost or penalty.
Exclusive License and Development Agreement with Carna
OnFebruary 2, 2022 , we entered into the Carna License Agreement with Carna, pursuant to which we acquired exclusive, worldwide rights to research, develop, and commercialize Carna's portfolio of novelSTING inhibitors. In accordance with the terms of the Carna License Agreement, in exchange for the licensed rights, we made a one-time cash payment of$2.0 million . The Carna License Agreement provides that we will make success-based payments to Carna of up to$258.0 million in the aggregate contingent upon achievement of specified development, regulatory, and commercial milestones. Further, the Carna License Agreement provides that we will pay Carna tiered royalty payments ranging from mid-single digits up to 10% of net sales. All of the contingent payments and royalties are payable in cash inU.S. Dollars. Under the terms of the Carna License Agreement, we will be responsible for, and bear the future costs of, all development and commercialization activities, including patenting, related to all the licensed compounds.
License and Development Agreement with Voronoi
OnAugust 27, 2021 , we entered into the Voronoi License Agreement with Voronoi, pursuant to which we acquired exclusive, worldwide rights to research, develop, and commercialize BBI-02, a novel, Phase 1-ready, potential first-in-class DYRK1A inhibitor, and other next-generation therapeutics developed from Voronoi's proprietary kinase inhibitor platform. In accordance with the terms of the Voronoi License Agreement, in exchange for the license rights, we made a one-time payment of$2.5 million in cash and issued$2.0 million , or 2,816,901 shares, of our common stock to Voronoi. As a result, we recorded$4.8 million in research and development expenses during the year endedDecember 31, 2021 . With respect to BBI-02, the Voronoi License Agreement provides that we will make payments to Voronoi of up to$211.0 million in the aggregate contingent upon achievement of specified development, regulatory, and commercial milestones. With respect to the next-generation compounds arising from the novel kinase inhibitor platform, we will make payments to Voronoi of up to$107.5 million in the aggregate contingent upon achievement of specified development, regulatory, and commercial milestones. Further, the Voronoi License Agreement provides that we will pay Voronoi tiered royalty payments ranging from low-single digits up to 10% of net sales of products arising from the in-licensed DYRK1A inhibitor programs and next-generation kinase inhibitor platform. All of the contingent payments and royalties are payable in cash inU.S. Dollars, except for$1.0 million of the development and regulatory milestone payments, which amount is payable in equivalent shares of our common stock. Under the terms of the Voronoi License Agreement, we will be responsible for, and bear the future costs of, all development and commercialization activities, including patenting, related to all the licensed compounds.
Amended and Restated License Agreement with Bodor
InFebruary 2020 , we, together with Brickell Subsidiary and Bodor, entered into the Amended and Restated License Agreement, which supersedes the License Agreement, datedDecember 15, 2012 , entered into between Brickell Subsidiary and Bodor, as amended by Amendment No. 1 to License Agreement, effective as ofOctober 21, 2013 , and Amendment No. 2 to License Agreement, effective as ofMarch 31, 2015 . 66 -------------------------------------------------------------------------------- Table of Contents The Amended and Restated License Agreement retains with us a worldwide, exclusive license to develop, manufacture, market, sell, and sublicense products containing the proprietary compound sofpironium bromide based upon the patents referenced in the Amended and Restated License Agreement for a defined field of use. As ofDecember 31, 2021 , under the original License Agreement and the Amended and Restated License Agreement, we had remaining obligations to pay Bodor (i) a royalty on sales of product outside Kaken's territory, including a low single-digit royalty on sales of certain product not covered by the patent estate licensed from Bodor; (ii) approximately 50 to 55% of all royalties we receive from Kaken for sales of product within its territory; (iii) a percentage of non-royalty sublicensing income we receive from Kaken or other sublicensees; and (iv) up to an aggregate of$0.8 million (plus an additional$0.1 million for approvals of additional products) in cash payments and$1.0 million of shares of our common stock upon the achievement of certain regulatory milestones. Under the terms of the Amended and Restated License Agreement, we made a$0.5 million milestone payment to Bodor following the closing of a public offering inJune 2020 and accrued an additional$1.0 million related to our plan to initiate ourU.S. Phase 3 pivotal program in the fourth quarter of 2020. As a result, we recorded$1.5 million as research and development expenses in the consolidated statements of operations during the year endedDecember 31, 2020 . No similar or associated research and development expense was incurred in the year endedDecember 31, 2021 , but we paid Bodor the applicable amount with respect to the royalties we received from Kaken for sales of ECCLOCK inJapan during those periods.
Financial Overview
Our operations to date have been limited to business planning, raising capital, developing our pipeline assets, identifying and in-licensing product candidates, conducting clinical trials, and other research and development activities. To date, we have financed operations primarily through funds received from the sale of common stock and warrants, convertible preferred stock, debt and convertible notes, and payments received under license and collaboration agreements. Other than through our sublicense of rights to sofpironium bromide to Kaken inJapan , we do not have any products approved for sale and have not generated any product sales. Since inception, we have incurred operating losses. We recorded a net loss of$39.5 million and$20.9 million for the years endedDecember 31, 2021 and 2020, respectively. As ofDecember 31, 2021 , we had an accumulated deficit of$145.4 million . We expect to continue incurring significant expenses and operating losses for at least the next several years as we:
•initiate and execute a Phase 1 clinical trial, along with other nonclincial development activities, for BBI-02;
•conduct preclinical development activities for BBI-10 and experimental
characterization of the
•engage in research to identify both brain penetrant and non-brain penetrant kinase inhibitors from the next-generation kinase inhibitor platform;
•advance research and development-related activities to develop and expand our product pipeline;
•prepare and submit an NDA for sofpironium bromide gel, 15% to the FDA;
•conduct certain pre-commercialization activities related to sofpironium bromide gel, 15%;
•maintain, expand, and protect our intellectual property portfolio for all our assets;
67
--------------------------------------------------------------------------------Table of Contents •hire additional staff, including clinical, regulatory, quality, alliance management, scientific, and management personnel; and
•add operational and finance personnel to support product and business development efforts.
We do not expect to generate significant revenue unless and until we successfully complete development of, obtain marketing approval for, and commercialize product candidates, either alone or in collaboration with third parties. We expect these activities may take several years and our success in these efforts is subject to significant uncertainty. We expect we will need to raise substantial additional capital prior to the regulatory approval and commercialization of any of our product candidates. Until such time, if ever, that we generate substantial product revenues, we expect to finance our operations through public or private equity or debt financings, collaborations or licenses, or other available financing transactions. However, we may be unable to raise additional funds through these or other means when needed.
Key Components of Operations
Revenue
Revenue generally consists of revenue recognized under our strategic collaboration agreements for the development and commercialization of our product candidates. Our strategic collaboration agreements generally outline overall development plans and include payments we receive at signing, payments for the achievement of certain milestones, and royalties. For these activities and payments, we utilize judgment to assess the nature of the performance obligations to determine whether the performance obligations are satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. Prior to 2020, we had not recognized any royalty revenue from any collaboration arrangement. Beginning during the three months endedDecember 31, 2020 , and continuing in 2021, pursuant to the Kaken Agreement, we recognized royalty revenue earned on a percentage of net sales of ECCLOCK inJapan , and we expect to continue to recognize such royalties going forward. Other than the revenue we may generate in connection with this agreement, we do not expect to generate any revenue from any product candidates that we develop unless and until we obtain regulatory approval and commercialize our products or enter into other collaboration agreements with third parties.
Research and Development Expenses
Research and development expenses principally consist of payments to third
parties known as CROs and upfront in-licensing fees of development-stage assets.
CROs help plan, organize, and conduct clinical and nonclinical studies under our
direction. Personnel costs, including wages, benefits, and share-based
compensation, related to our research and development staff in support of
product development activities are also included, as well as costs incurred for
supplies, preclinical studies and toxicology tests, consultants, and facility
and related overhead costs.
68
--------------------------------------------------------------------------------
Table of Contents
Below is a summary of our research and development expenses related to
sofpironium bromide and our DYRK1A inhibitor program, including our
next-generation kinase inhibitor platform, by categories of costs for the
periods presented.
Year Ended
December 31,
2021 2020
(in thousands)
Direct program expenses related to
Sofpironium bromide (1) $ 18,647 $ 7,944
Other pipeline programs (2) 5,355 -
Personnel and other expenses (3)
Salaries, benefits, and stock-based compensation 2,423 2,895
Regulatory and compliance 1,322 222
Other expenses 484 155
Total research and development expenses (4) $ 28,231 ____________
(1)Sofpironium bromide. We expect our research and development expenses related to sofpironium bromide to decrease in future periods given the end of our Phase 3 clinical trials for sofpironium bromide. (2)Other pipeline programs. InAugust 2021 we acquired the DYRK1A inhibitor program targeting autoimmune and inflammatory diseases. To date, the expenses associated with our DYRK1A inhibitor program primarily relate to upfront in-licensing fees. We plan to progress BBI-02 into a Phase 1 clinical trial inCanada in the second quarter of 2022. We are also engaging in research to identify new chemical entities from our next-generation kinase inhibitor platform. As a result, in the following years, we expect to incur research and development expense for these programs at levels consistent with expenditures for development of early-stage assets.
(3)Personnel and other expenses. Personnel and other expenses include operational expenses not specifically attributable to a specific program. Other expenses include travel, lab and office supplies, clinical trial management software, license fees, and other miscellaneous expenses.
(4)STING inhibitor platform. InFebruary 2022 , we acquired a portfolio of novel, potent, and orally availableSTING inhibitors that has broad potential in autoinflammatory diseases. Nonclinical development activities for our lead early-stageSTING inhibitor candidate, BBI-10, are currently underway, and we expect to conduct experimental characterization of theSTING inhibitor library throughout 2022. As a result, in the following years, we expect to incur research and development expense for this program at levels consistent with expenditures for development of early-stage assets.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, including wages, benefits, and share-based compensation, related to our executive, sales, marketing, finance, and human resources personnel, as well as professional fees, including legal, accounting, and sublicensing fees.
69
--------------------------------------------------------------------------------
Table of Contents
Other Income, Net
Other income, net consists primarily of a gain on extinguishment of debt
recognized in June 2021 as a result of the forgiveness of an outstanding loan
that we received under the Paycheck Protection Program (the "PPP Loan"). Other
income, net also consists of interest income, interest expense, and various
income or expense items of a non-recurring nature. We earn interest income from
interest-bearing accounts and money market funds. Interest expense is comprised
of interest incurred related to the PPP Loan. Our interest income varies each
reporting period depending on our average cash balances during the period and
market interest rates. We expect interest income to fluctuate in the future with
changes in average cash balances and market interest rates.
Critical Accounting Estimates
We have prepared the consolidated financial statements in accordance with accounting principles generally accepted inthe United States of America ("U.S. GAAP"). The preparation of these consolidated financial statements requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosures at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates its critical estimates, including those related to revenue recognition and accrued research and development expenses. We base our estimates on our historical experience and on assumptions that we believe are reasonable; however, actual results may differ materially from these estimates under different assumptions or conditions. For information on our significant accounting policies, please refer to Note 2 of the notes to our consolidated financial statements included elsewhere in this Annual Report. Revenue Recognition
We currently recognize revenue primarily from licensing and royalty fees received under the Kaken Agreement. The terms of the agreement include non-refundable upfront fees, funding of research and development activities, payments based upon achievement of milestones, and royalties on net product sales.
We recognize revenue upon the transfer of promised goods or services to
customers in an amount that reflects the consideration to which we expect to be
entitled in exchange for those goods or services. In determining the appropriate
amount of revenue to be recognized, we perform the following five steps:
(i) identify the contract(s) with a customer; (ii) identify the performance
obligations in the contract; (iii) determine the transaction price, including
the constraint on variable consideration; (iv) allocate the transaction price to
the performance obligations in the contract; and (v) recognize revenue when (or
as) we satisfy the performance obligations. At contract inception, we assess the
goods or services promised within each contract and assess whether each promised
good or service is distinct and determine those that are performance
obligations. We then recognize as revenue the amount of the transaction price
that is allocated to the respective performance obligation when (or as) the
performance obligation is satisfied. To date, we have not received approval for
any drug candidates from the FDA.
At contract inception, we assess the goods or services promised within each
contract, determine those that are performance obligations, and assess whether
each promised good or service is distinct. We then recognize as revenue the
amount of the transaction price that is allocated to the respective performance
obligation when or as the performance obligation is satisfied. We utilize
judgment to assess the nature of the performance obligation to determine whether
the performance obligation is satisfied over time or at a point in time and, if
over time, the appropriate method of measuring progress. We evaluate the measure
of progress each reporting period and, if necessary, adjust the measure of
performance and related revenue recognition.
70
--------------------------------------------------------------------------------
Table of Contents
Licenses of Intellectual Property
If a license for our intellectual property is determined to be distinct from the
other performance obligations identified in the arrangement, we recognize
revenue from non-refundable, upfront fees allocated to the license when the
license is transferred to the customer, and the customer can use and benefit
from the license.
Milestones
At the inception of each arrangement that includes milestone payments (variable
consideration), we evaluate whether the milestones are considered probable of
being reached and estimate the amount to be included in the transaction price
using the most likely amount method. If it is probable that a significant
revenue reversal would not occur, the value of the associated milestone (such as
a regulatory submission) is included in the transaction price. Milestone
payments that are not within our control or the control of our collaboration
partner, such as regulatory approvals, are generally not considered probable of
being achieved until those approvals are received. The transaction price is then
allocated to each performance obligation on a relative stand-alone selling price
basis, for which we recognize revenue as or when the performance obligations
under the contract are satisfied. At the end of each subsequent reporting
period, we re-evaluate the probability of achievement of such development
milestones and any related constraint, and if necessary, adjust our estimate of
the overall transaction price. Any such adjustments are recorded on a cumulative
catch-up basis, which would affect license, collaboration, and other revenues
and earnings in the period of adjustment and future periods through the end of
the performance obligation period. To date, Kaken has paid us $10.0 million in
milestone payments under the Kaken Agreement.
Royalties
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). InSeptember 2020 , Kaken received regulatory approval inJapan to manufacture and market ECCLOCK for the treatment of primary axillary hyperhidrosis, and as a result, we began recognizing royalty revenue earned on a percentage of net sales of ECCLOCK inJapan of$27 thousand during the fourth quarter of 2020. Prior to the fourth quarter of 2020, we had not recognized any royalty revenue from any collaboration arrangement. During the year endedDecember 31, 2021 , we recognized royalty revenue of$0.4 million .
For a complete discussion of accounting for collaboration licensing agreements, see Note 2 of the notes to our consolidated financial statements included elsewhere in this Annual Report. Our revenue to date has been generated primarily from licensing and development fees received under the Kaken Agreement.
Research and Development
Research and development costs are charged to expense when incurred and consist
of costs incurred for independent and collaboration research and development
activities. The major components of research and development costs include
formulation development, nonclinical studies, clinical studies, clinical
manufacturing costs, in-licensing fees for development-stage assets, salaries
and employee benefits, and allocations of various overhead and occupancy costs.
Research costs typically consist of applied research, preclinical, and
toxicology work. Pharmaceutical manufacturing development costs consist of
product formulation, chemical analysis, and the transfer and scale-up of
manufacturing at contract manufacturers. Assets acquired (or in-licensed) that
are utilized in research and development that have no alternative future use are
expensed as incurred. Milestone payments related to our acquired (or
in-licensed) assets are recorded as research and development expense when
probable and can be reasonably estimated.
71
--------------------------------------------------------------------------------
Table of Contents
Expense accruals related to clinical trials are based on our estimates of
services received and efforts expended pursuant to contracts with multiple
research institutions and CROs that conduct and manage clinical trials on our
behalf. The financial terms of these agreements vary from contract to contract
and may result in uneven payment flows. Payments under some of these contracts
depend on factors such as the successful enrollment of patients and the
completion of clinical trial milestones. In accruing costs, we estimate the
period over which services will be performed and the level of effort to be
expended in each period based upon patient enrollment, clinical site
activations, or information provided to us by our vendors on their actual costs
incurred. Any estimates of the level of services performed or the costs of these
services could differ from actual results.
To date, we have not experienced significant changes in our estimates of accrued
research and development expenses after a reporting period. However, due to the
nature of estimates, we cannot assure that we will not make changes to our
estimates in the future as we become aware of additional information about the
status or conduct of our clinical trials and other research activities.
Recent Accounting Pronouncements
Unless otherwise discussed elsewhere in this Annual Report, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our consolidated financial statements upon adoption. Results of Operations
Comparison of the Years Ended
Year Ended
December 31,
2021 2020
(in thousands)
Revenue $ 404 $ 1,822
Research and development expenses (28,231) (11,216)
General and administrative expenses (12,417) (11,582) Total other income, net 770 63 Net loss$ (39,474) $ (20,913) Revenue Revenue decreased by$1.4 million for the year endedDecember 31, 2021 , compared to the year endedDecember 31, 2020 . Revenue in 2021 consisted of royalty revenue recognized related to sales of ECCLOCK inJapan by Kaken, while revenue in 2020 was driven primarily by collaboration revenue recognized for research and development activities under the Kaken Agreement pursuant to which Kaken provided research and development funding to us. The increase in royalty revenue recognized related to the regulatory approval inSeptember 2020 for the manufacturing and marketing of ECCLOCK for the treatment of primary axillary hyperhidrosis. Prior to the fourth quarter of 2020, we had not recognized any royalty revenue from any collaboration arrangement. As a result of the regulatory approval, we began recognizing royalty revenue earned on a percentage of net sales of ECCLOCK inJapan of$27 thousand during the fourth quarter of 2020. During the year endedDecember 31, 2021 , we recognized royalty revenue of$0.4 million . The decrease in collaboration revenue recognized was primarily attributable to our Phase 3 open-label long-term safety study of sofpironium bromide gel and other ancillary clinical studies that were concluded or winding 72 -------------------------------------------------------------------------------- Table of Contents down by the end of the first quarter of 2020. Conducting these studies was the basis for revenue recognition over time, through the third quarter of 2020, of a$15.6 million research and development payment received from Kaken in the second quarter of 2018.
Research and Development Expenses
Research and development expenses increased by$17.0 million for the year endedDecember 31, 2021 , compared to the year endedDecember 31, 2020 , which was primarily due to an increase of$10.7 million in clinical costs related to ourU.S. Phase 3 pivotal clinical program for sofpironium bromide gel, 15%, an increase of$5.4 million in upfront costs and development expenses related to our DYRK1A inhibitor programs and next-generation kinase inhibitor platform, and an increase of$0.9 million in personnel and other expenses.
General and Administrative Expenses
General and administrative expenses increased by$0.8 million for the year endedDecember 31, 2021 , compared to the year endedDecember 31, 2020 . The increase was primarily due to compensation and administrative expenses.
Total Other Income, Net
Total other income, net increased by$0.7 million for the year endedDecember 31, 2021 compared to the year endedDecember 31, 2020 . The increase was primarily due to a gain on extinguishment of debt of approximately$0.4 million that resulted from the forgiveness of the PPP Loan inJune 2021 and other miscellaneous income of$0.3 million .
Liquidity and Capital Resources
We have incurred significant operating losses and have an accumulated deficit as a result of ongoing efforts to in-license and develop our product candidates, including conducting preclinical and clinical trials and providing general and administrative support for these operations. For the years endedDecember 31, 2021 and 2020, we had a net loss of$39.5 million and$20.9 million , respectively. As ofDecember 31, 2021 , we had an accumulated deficit of$145.4 million . As ofDecember 31, 2021 , we had cash and cash equivalents of$26.9 million compared to$30.1 million as ofDecember 31, 2020 . Since inception, we have financed our operations primarily through funds received from the sale of common stock and warrants, convertible preferred stock, debt, and convertible notes, and payments received under license and collaboration agreements. We believe that our cash and cash equivalents as ofDecember 31, 2021 will be sufficient to fund our operations for at least the next 12 months, including through the receipt of the Phase 1 topline results for BBI-02, which is anticipated year-end 2022. Thereafter, we expect we will need additional funding to continue with our planned development and other activities. However, it is difficult to predict our spending for our product candidates prior to obtaining FDA approval. Moreover, changing circumstances may cause us to expend cash significantly faster than we currently anticipate, and we may need to spend more cash than currently expected because of circumstances beyond our control. We expect to continue to incur additional substantial losses in the foreseeable future as a result of our research and development activities. 73 -------------------------------------------------------------------------------- Table of Contents Cash Flows Since inception, we have primarily used our available cash to fund expenditures related to product discovery and development activities. The following table sets forth a summary of cash flows for the periods presented: Year Ended December 31, 2021 2020 (in thousands) Net cash provided by (used in): Operating activities$ (36,148) $ (20,034) Investing activities (36) 4,477 Financing activities 32,953 38,440 Total$ (3,231) $ 22,883 Operating Activities Net cash used in operating activities of$36.1 million during the year endedDecember 31, 2021 increased compared to$20.0 million during the year endedDecember 31, 2020 , which was primarily attributable to an increase in cash used to support our operating activities, including but not limited to, our clinical trials, an increase in research and development activities, and general working capital requirements. The$16.1 million increase was impacted by an increase in net loss of$18.6 million , partially offset by the net effect of changes in working capital of$1.1 million and an increase in non-cash operating expenses of$1.4 million , which primarily consisted of$2.0 million in expense for the issuance of our common stock under the Voronoi License Agreement, net of a$0.4 million gain on extinguishment of the PPP Loan.
Investing Activities
Net cash provided by investing activities during the year endedDecember 31, 2021 decreased by$4.5 million compared to the year endedDecember 31, 2020 . The decrease in net cash provided by investing activities was primarily the result of a$4.5 million reduction in maturities of marketable securities.
Financing Activities
Net cash provided by financing activities of$33.0 million during the year endedDecember 31, 2021 decreased compared to$38.4 million during the year endedDecember 31, 2020 . The decrease was primarily related to a reduction of$16.7 million in net proceeds from offerings of common stock and warrants and$0.4 million in proceeds received from the PPP Loan in the year endedDecember 31, 2020 that did not recur in the year endedDecember 31, 2021 , which was partially offset by higher net proceeds received of$8.9 million from the exercise of warrants and$2.8 million in sales of our common stock under the ATM Agreements and the Purchase Agreement.
© Edgar Online, source
